In The Pipeline 7/14/11

IER’s Tom Pyle gives the White House a math lesson U.S. News In the current stalemate on raising the debt ceiling, President Obama has ratcheted up the rhetoric against the American oil and gas industry.  Big Oil, he insists, benefits from generous federal subsidies and enjoys favorable treatment from the current tax code.  The president maintains that increasing taxes on these companies will help close the federal deficit while avoiding any adverse economic consequences…Take a look at the numbers, however, and it becomes clear that raising taxes on the American oil and gas industry has nothing to do with the federal purse and everything to do with the president’s desire to see energy prices necessarily skyrocket…The president proposes forbidding American oil and gas companies from taking advantage of the Section 199 tax deduction and the Dual Capacity Taxpayer credit, both of which are available to a wide array of American companies. Section 199 allows American companies to deduct capital expenses for producing goods and creating jobs here at home from their pre-tax income.  While every other American manufacturing company may deduct up to 9 percent of their pre-tax income, the five major integrated oil and gas companies are already capped at 6 percent…The Dual Capacity rules prevent American companies from being taxed twice on income earned abroad.  Rules finalized over 25 years ago hold American firms to a strict standard as to how much they can deduct from their American income tax liability.  President Obama’s proposal would force American firms operating abroad to be subject to double taxation while their foreign competitors are able to avoid such harsh treatment.  Essentially, the plan puts American oil and gas companies at a competitive disadvantage to energy companies around the globe.

The source of Bromwich’s power is his beard. If we can only find a modern day Delilah…we will settle for House Appropriations Committee The Hill (7/14/11) reports: The Interior Department’s top offshore drilling regulator is eyeing wide changes to drilling safety rules that have already been beefed up in the wake of the BP oil spill…Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), told reporters Wednesday that an upcoming preliminary notice of new regulations will be “extremely broad.”…It will include rules governing subsea blowout preventers — the supposedly fail-safe device that could not stop BP’s runaway well — and many other aspects of drilling safety. “It will contemplate a large body of improvements and enhancements to our current regulations,” Bromwich said…Bromwich’s comments signal that regulators believe improved oversight remains a work in progress despite new policies and safeguards adopted after the Deepwater Horizon disaster last year…The bureau last year issued new standards for well design, casing, cementing, blowout preventers and other equipment…The bureau now is preparing a so-called advance notice of proposed rulemaking for the further revisions, a preliminary step in the rulemaking process that will solicit input on its plans…Bromwich said it would focus on “all the elements of drilling safety.” He spoke from New Orleans, where Interior’s offshore drilling safety advisory panel is meeting.

Yesterday Rep. Ron Paul asked Mr. Bernanke if he follows the price of gold or if he considers gold to be money — his answer was no. Crude is up on inflation fears Fuel Fix (7/14/11) reports:  An unexpected drop in U.S. crude supplies boosted oil prices Wednesday, and more government stimulus spending could help push oil even higher this year…Benchmark West Texas Intermediate crude for August delivery rose 62 cents to settle at $98.05 per barrel on the New York Mercantile Exchange. WTI got as high as $99.21 before easing back. Brent crude, which is used to price many foreign oil varieties, gained 91 cents to settle at $117.85 per barrel on the ICE Futures exchange in London…Retail gasoline prices rose a penny on Wednesday to a national average of $3.645 per gallon. In Houston, the average price rose a cent to $3.522 a gallon…Oil jumped after the Energy Information Administration said that the nation’s crude supplies fell by 3.1 million barrels last week, a million barrels more than the decline that analysts forecast in a survey by Platts, the energy-information arm of McGraw Hill Cos. The drop was due in large part to lower imports of foreign oil. The EIA also said that oil and gasoline demand fell…The price of oil got an extra boost from Federal Reserve Chairman Ben Bernanke, who said Wednesday that the central bank is looking for ways to reinvigorate the sluggish American economy. Bernanke said in his semi-annual report to Congress that the Fed is considering a few options, including another round of Treasury bond buying.

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No surprise here folks, our government has created an energy famine. We have it in our power to provide the world with affordable energy if only given permission from Washington Wall Street Journal (7/14/11) reports: Data from the International Energy Agency published Wednesday amply demonstrates the key problem with world oil supply today—we are running faster and faster just to stand still…In June, Saudi Arabia responded to rising oil demand, against the protests of fellow OPEC members, by pumping an extra 700,000 barrels a day of oil, according to IEA data. This is no mean feat—equivalent to more than half U.K. oil output—and takes Saudi oil production to its highest level in almost five-and-a-half years…So what effect did this major effort have on the crucial balance between oil supply and demand? Very little…The gap between how much oil the world needs for the third quarter and total OPEC production shrank from just 1.5 million barrels a day in May to 1.3 million barrels a day June. Oil prices are also close to the peaks they reached in early June, before the Saudis raised production and prior to the IEA’s release of 60 million barrels of emergency oil stocks over 30 days…Just how could two such dramatic actions deal merely glancing blows to the oil price? The answer lies in three long-standing problems: Oil supply from countries outside OPEC for 2011 was revised down by 0.2 million barrels a day because of “prolonged production outages” in a number of important oil producing regions, the IEA said. Such disappointment is an increasingly common occurrence as non-OPEC producers struggle with aging oil fields, complex technical problems and hard-to-access resources.

White House is getting sloppy with their money laundering scheme — House plans to subpoena OMB over Solyndra The Hill (7/14/11) reports: House Energy and Commerce Committee Republicans are playing hardball with the White House to obtain documents about a federal loan guarantee to a California company that manufactures cutting-edge solar panels but has faced financial problems…The committee’s oversight and investigations panel will vote Thursday on a motion to subpoena the White House Office of Management and Budget for documents about the Energy Department’s $535 million loan guarantee for Solyndra Inc…Committee Republicans have been investigating the aid, which was enabled by the 2009 stimulus law, and allege that the White House has not provided certain documents…“After two years of zero oversight of the Obama clean energy programs, our investigation has been an exercise in good government to ensure that billions of taxpayer dollars have been spent wisely. Yet OMB has sought to delay and put off this investigation at every step of the way. Subpoenas would not be necessary if OMB had lived up to its agreement and produced the documents as requested,” said Rep. Cliff Stearns (R-Fla.), who chairs the Oversight and Investigations Subcommittee, in a joint statement with full committee Chairman Fred Upton (R-Mich.)…But OMB says it is trying to work cooperatively with the subcommittee to provide information it is looking for, and has already provided substantial amounts of documents.